Wake Smith debt recovery manager Louisa Kearns looks at forthcoming changes to the way in which debts are collected.
The Pre-Action Protocol for Debt Claims (“Protocol”) comes into force on 1st October 2017. It applies to any business claiming payment of a debt from an individual (including a sole trader). It does not apply where a business is claiming payment of a debt from another business (except a sole trader).
The aims of the Protocol are to encourage early engagement and communication between the parties, enable parties to resolve the matter without the need to start Court proceedings, encourage parties to act in a reasonable and proportionate manner in all dealings with one another and to support the efficient management of proceedings that cannot be avoided.
Louisa said: “The Protocol requires us to send a letter of claim to the debtor, as before, with information about the amount of the debt, whether interest or other charges are continuing, how the debt arose and information about how the debt can be paid. We also have to provide an up to date statement of account for the debt together with an Information Sheet, Reply Form and a Financial Statement Form.”
The letter must be sent by post unless the debtor has made an explicit request that it should not be sent by post and has provided alternative contact details. The debtor must respond to the letter of claim within 30 days. If the debtor does not reply within 30 days you may then start court proceedings provided you have given 14 days’ notice of this.
The debtor should respond using the Reply Form which we have to provide. The Reply Form asks the debtor whether they agree they owe the debt, some of the debt or dispute the debt; it asks for details of how they will pay the debt and whether they intend to take debt advice. The debtor can ask for copies of documents and can provide documents considered relevant.
A minimum period of 30 days must then pass from the date the debtor’s Reply Form is received or from when documents are provided (whichever is the later) during which time the parties should attempt to resolve the issue or agree payments terms. This time should be used by the debtor to take debt advice. If the debtor makes instalment proposals and these are rejected, reasons must be given in writing. This time should also be used to undertake Alternative Dispute Resolution either in the form of discussions or negotiations or through formal mediation.
If after the 30 day period no agreement has been reached with the debtor we must then give 14 days’ notice of intention to issue court proceedings.
Louisa added “Where parties do reach agreement concerning repayment of the debt, court proceedings should not be started while ever the debtor complies. If you want to start court proceedings at a later date you must send an up dated Letter of Claim and comply afresh with the Protocol.”
Failure to comply with the Protocol could result in sanctions against the defaulting party.
Click here for an overview of Pre-Action Protocol for Debt Claims.
For further information contact Louisa Kearns on 0114 266 6660 or at [email protected]
